Grocery Prices Don't Count

(Conspiracy Nation, 10/05/07) – Rising demand for ethanol has driven up the price of corn. The price for a gallon of milk is up 21 percent. Orange juice costs 31 percent more. (“The Rising Cost Of Groceries,” The Week magazine, September 28, 2007, p. 34)

But this is not inflation, according to U.S. experts. In Europe it is not ascertained whether the experts consider higher grocery prices to be inflation. Europe apparently does consider higher energy costs to be inflation, which the U.S. experts do not. Yesterday, the European Central Bank (ECB) left rates unchanged, in contrast to the “Federal” Reserve, which generously handed Wall Street a boon. Although the ECB left rates unchanged, “the bank has to preserve its options in case the outlook for inflation worsens — an entirely plausible event given escalating oil and commodity prices.” (“Europe’s Central Bank Holds Main Rate Steady,” by Carter Dougherty. NY Times, October 5, 2007). In other words, escalating oil prices in Europe are inflation. But this is not so in the U.S., where higher oil prices are not inflation.

The U.S. Congress has been saying, “Hooray for ethanol!” But the energy balance for ethanol is a pitiful 1.3 to 1, “meaning that corn-based ethanol produces barely more energy than is consumed to make it.” By contrast, ethanol from sugar cane has an 8 to 1 energy balance. Ethanol is not “green”: it produces more ozone than gasoline. Ethanol cannot be shipped via pipelines, “because it readily absorbs water and other impurities.” So the ethanol must travel by trucks, which need gasoline. (“The Ethanol Craze.” The Week magazine, October 5, 2007, p. 14).

In the U.S., “corn prices have risen 58 percent this year.” This ramifies to increases in beef (steers fed on corn) and soft drink (corn syrup) prices. Also, because of the ethanol craze, the farmers plant more corn and less of other crops. This makes potato chips cost more, for example, because fewer potatos are planted. (“The Ethanol Craze,” op. cit.)

How did this happen? The Washington, DC government has mandated, “Produce more ethanol.” The corn-producing states are enriched by the mandate. They send congress critters to Washington who favor such legislation. “Congress has lavished more than $50 billion in subsidies and tax breaks for ethanol since 1995.” Archer Daniels Midland (ADM) has received “at least $10 billion of that largesse.” ADM, in turn, has passed along $3 million in “campaign contributions” to various congress critters. In Iowa, an early primary state, all the presidential candidates say, “Hooray for ethanol!” (“The Ethanol Craze,” op. cit.)

So you, Mr. and Mrs. Grocery Shopper, are stunned by expanding food prices. And to bail out Wall Street, the “Federal” Reserve has been churning out dollars – so your dollar at the grocery store is worth less. All this explains why groceries cost so much more: the ethanol craze and the dollar devaluation. But be comforted at least by the fact that, according to U.S. experts, those high food prices are not – repeat not – inflation.

Conspiracy Nation

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